SDG 13 - Climate action

It will be necessary to reorganise every area of life – from power production, to transport and agriculture, to building construction – if we are to substantially limit global warming. Large investments will be needed; the Intergovernmental Panel on Climate Change has estimated that around USD 2.4 trillion will be needed in the energy sector alone. In addition to proven instruments, innovative instruments will also be necessary to mobilise these funds. KfW works with these instruments, such as funds for green companies or insurance against consequential losses from extreme weather conditions due to climate change, such as the African Risk Capacity (ARC). KfW also issues green bonds – bonds that mobilise private capital, the proceeds of which are used for climate and environmental protection projects. To date, KfW has issued green bonds in the amount of more than EUR 37 billion. This makes it one of the largest issuers worldwide.

To make the financial world greener, KfW participates in associations with other financial institutions like the International Development Finance Club (IDFC). This has brought together 26 development banks with a joint vision of a sustainable future and less poverty throughout the world. Between 2015 and 2019, they committed a total of USD 867 billion for green financing.

In addition, KfW set itself the goal of positioning itself to be even more sustainable. With the group-wide project "tranSForm" in the area of Sustainable Finance, it has initiated trend-setting changes that focus on the contribution of financing to a sustainable and climate-friendly transformation of the economy and society. Among other things, KfW will anchor SDG contributions and Paris compatibility even more strongly in its financings. 2020 also saw the introduction of climate mainstreaming in KfW Development Bank. This means that all climate effects and risks will be analysed at the early design stage of every project so that these can be systematically accounted for in the project design. In this way, the project’s effectiveness in terms of climate protection can be further increased and possible risks can be addressed more effectively. Risk-mitigating measures can thus be even more deeply integrated into the entire FC portfolio.

Today it is no longer possible to think about development without taking the environment and climate into account. The growing global population’s increasing demand for food, water, commodities, housing and mobility cannot be met with conventional patterns. So KfW is investing in a sustainable development trajectory. For example, it promotes forest conservation as forests play a key role in climate and nature protecting. KfW supports reforestation programmes such as the ones in Madagascar or Vietnam. It sees the potential of agro-forestry systems to balance forest use with conservation. And KfW supports compensation programmes that provide incentives for forest conservation, for example in Ecuador and Colombia.

It is now undisputed that global warming, the destruction of ecosystems and the danger of pandemics are inextricably linked and must therefore be tackled together. The trend of rapid species extinction must be reversed, also as a means of climate protection. The best way to do this is through well-managed protected areas, if they closely involve the local population. KfW established the Legacy Landscapes Fund (LLF) on behalf of the German government for precisely this purpose. It finances protected areas and their surrounding areas in poor countries. The idea behind the LLF is as simple as it is compelling: if it succeeds in preserving as many species as possible in biodiversity-rich but low-income areas of the world, a good part of the biodiversity that is essential for survival will be secured for the whole world – and thus also for the climate and adaptation. Through the participation of private donors, the LLF can help close the large funding gap in nature and climate protection.Another important concern at KfW is global marine conservation. The world’s oceans are not just a significant carbon sink, they also provide a source of food and income for billions of coastal inhabitants. Charitable trusts and initiatives co-founded by KfW like the Blue Action Fund (BAF) (PDF, 103 KB, non-accessible) or the Clean Oceans Initiative (COI) promote conservation areas, sustainable fishing, environmentally friendly tourism and fighting plastic waste.

Despite all efforts to curb or store climate-damaging gases and preserve ecosystems, the Earth’s temperature will continue to rise. So in addition to climate-friendly development, adjusting to climate change is also a focus area. Here, KfW is investing in projects such as coastal protection in Tunisia to keep the land from being flooded.

The burning of fossil fuels is a one-way street that is not sustainable. Experts around the world are searching for alternatives, and investments are being made in new technologies to cover the growing energy requirements with climate-friendly sources. This is where many developing countries are at an advantage; they are not yet fully exploiting the use of the enormous renewable energy resources they have. KfW wants to drive transformation forward and is actively financing infrastructure to tap into these renewable energy sources. It is financing projects like the largest solar power plant in Africa to date in Ouarzazate, Morocco, wind farms in Egypt and Bosnia-Herzegovina and geothermal power plants in Indonesia and Kenya.

But power is not always produced where it is needed, and the suppy of energy from renewable sources naturally fluctuates – so sufficient grids and storage capacity are required. In India, for example, KfW is supporting construction of “green corridors”, which are expansive routes used to transport power to the country’s economic centres. But the most environmentally friendly energy is the power that is not needed in the first place. So KfW promotes the more efficient use of energy. For example, it supports the construction of eco-houses for poorer families in Mexico – now home to more than 100,000 people – or the energy-efficient refurbishment of public buildings in Montenegro (PDF, 98 KB, non-accessible).

The energy transition is expanding: In addition to power generation through renewable energies for industry and private households, energy will increasingly play a role in the future through applications in district heating and e-mobility. In addition, power-to-X technologies are becoming increasingly important for converting electricity generated from wind or solar into other energy sources and using them. Closely linked to the energy transition is the necessary transport transition. So KfW is promoting electric mass transportation like underground and suburban railways, for example in Brazil, Tunisia and India, but also non-motorised transport such as in the form of bike paths in South Africa or Peru. KfW believes that creating sustainable mobility systems that seamlessly coordinate transport methods and integrate them in targeted urban planning is one of the most urgent tasks in the coming years.